


Supplier Development
 Supplier development
• Supplier development is broadly defined as
any activity that a buying firm undertakes
to improve a supplier’s performance and
capabilities to meet the buying firm’s
supply needs
• Buying firms use a variety of activities to
improve supplier performance including:
– Assessing suppliers’ operations
– Providing incentives to improve performance
– Instigating competition among suppliers
– Working directly with suppliers

 Strategic Importance of
Supplier Development
 When a supplier is incapable of
meeting the buying firm’s
needs, the buying firm has
three alternatives:
1.Bring the outsourced item in-
house and produce it internally
2.Re-source with a more capable
supplier
3.Help improve the existing
supplier’s capabilities

 Results of Supplier
Development
 When suppliers become
proficient at new technologies,
improve their quality or
delivery performance, or
improve their own supply
management systems, they
create cost savings that benefit
both themselves and the end
customer
 The improvements also create an
example for other members in
the supply chain that can
 Best Practices in Supplier
Development
 Create dedicated supply
development teams
 Teach a supplier how to develop
itself after initial guidance from
the supplier development team
 Focus on underlying causes of long
cycle times
 Focus on wasteful activities in all
supplier efforts
 Involve suppliers in new product
and process development at the
 Provide training programs and training
time to suppliers
 Provide education programs offline
that go beyond training
 Provide improvement focused seminars
for suppliers
 Provide tooling and technical
assistance to suppliers
 Provide supplier support centers
 Loan executives, such as process
engineers and quality managers
• Drive fear out that a supplier’s
workforce may have towards
supplier development programs
• Set “stretch goals” to encourage
radical change as well as
continuous improvement
• Improve accounting systems to
enable measurement of
improvements
•
• Share the savings from the
development improvements
• Encourage suppliers to
contribute to improving
processes at the buyer’s
facilities
• Provide a feedback loop for
suppliers to help encourage
supplier development efforts
• Improve the supplier’s supply
 Supplier Development
Process
• Initiating the Project
• Mapping and Measuring
• Developing the Process
• Achieving Results
• Controlling the Process
• Recognizing the Team
•
 Initiating the Project

• In the first phase, the main

activities are to:
– Develop and confirm a
preliminary supplier
development charter
– Define the supplier’s processes
– Assess the customer’s needs
– Assess the business environment

 Mapping and Measuring

• Map / Analyze Supplier Processes

• Identify Process Metrics
• Collect Baseline Data
• Analyze Baseline Data
• Document the Baseline
•
•
 Developing the Process

 Developing the process requires a

project implementation plan that
includes:
– activities required to complete the
project
– expected completion time of the
activities
– project milestones
– resources assigned to activities
– Expected completion time of the
project
 The plan is used to track and
• The following critical activities
occur during this phase:
– Create Solutions
– Select Solutions
– Develop New Process
– Plan Implementation

 Achieving Results
 The project team executes the
implementation plan
 A new, lean process is
implemented
 Relevant personnel are made
available to assist
 Direction and resources are
provided by champions
 Project progress is communicated
 Documentation is created for
clarity and consistency
 Controlling the Process
• Ongoing metrics are defined
• A closed-loop corrective action
procedure system is installed
to review the process
• Gaps in performance are
addresses
• Performance is continuously
improved
• The control plan ensures that
activities in the process are
 Recognizing the Team
• Activities should be organized to
promote the success of the
project
• The team shares the lessons
learned and best practices with
the supplier’s organization
• Project results may be published
internally to share with the rest
of the supply chain
• Formal events may be organized
 Barriers to Supplier
Development
 Poor communication and
feedback
 Complacency
 Misguided improvement
objectives
 Credibility of customers
 Misconceptions regarding
purchasing power
 Lack of clarity and commitment
 Lack of a unified approach
 Barriers to Supplier
Development
 Concealment of problems
 Initiative fatigue
 Resource limitations
 “Blame the supplier” culture
 Lack of trust
 Confidentiality issues
 Legal issues
 Imbalance of power in the
relationship

 What is Supplier Quality
Management?

• Supplier Quality Management is

the process of measuring,
analyzing and managing
supplier performance for the
purpose of mitigating risks,
reducing costs, improving
quality and driving continuous
improvement, as to have
adequate quality supplier to
produce quality product and
service and avoid unnecessary
World-class


suppliers
Three traits of world-class
suppliers

• Competitive price, quality,

and lead times are just the
opening antes in the supply
game. To be considered
world-class, suppliers must
excel in these key areas:
 1 Continuous improvement:
World-class suppliers have a
formal and proven
•2 Technology and
innovation: World-
class suppliers are
technology leaders in
their respective
industries, providing
customers with next-
generation
• 3 Adaptability: World-class
suppliers are willing to
invest in new equipment,
develop new
technologies, and rework
their business to better
support the strategies of
their customers.
 How to raise top-notch
suppliers
 World-class suppliers have certain
attributes and a mindset that
sets them apart from the rest of
the pack. While much of this is a
reflection of the supplier's
business management and
strategies, purchasing has a hand
in developing world-class
suppliers. Here's how:
 Be a tough scout: Research and
audit suppliers' performance and
• Establish expectations: Lay out
performance goals and other
expectations for suppliers early
in the relationship.
• Watch closely: Continually
measure supplier performance
to established goals.
Communicate measurement
results with suppliers on a
regular basis.
 Offer assistance when needed: Sometimes
even world-class suppliers get off track.
When they do, buyers need to provide
training or guidance.


 Reward good deeds: Provide suppliers

with incentives to do their best. These
include:
v long-term contracts,
v new business top-performers, and
v gain-sharing for those suppliers
that beat performance targets.

 
 World wide sourcing
process
• International sourcing
approach differs from
company to company.
The step-by-step
procedure to be followed
in global sourcing is
discussed below:
 Identify items that qualify
for worldwide sourcing:
 Companies should select items for
foreign purchase considering
the cost benefit, quality
excellence, superior technology,
customer responsiveness and
product features.
 Items available from multiple
sources are good candidates for
selection. The volume should
justify to go for global sourcing.
Items with high product life
cycle are also considered for
 Gather information about
global sourcing:
 After identifying items to source
world wide, a company must gather
and evaluate information about
potential suppliers.
 Internet plays a very important role
for gathering information about the
potential suppliers. Trade centres
conduct exhibitions. These become
important source for identifying
potential source. Trading
companies can be approached for
assistance. Most of these
companies have a long history of
trade and have the expertise to
Ø International trade experts also
can be utilized for getting
information about the potential
suppliers. Other potential
sources include
Ø trade journals and
Ø sale catalogs
Ø yellow pages for a country,
 Supplier source
Evaluation:
 Evaluation is key in locating
correct supplier globally. Enough
care should be taken in
evaluating the identified
potential suppliers for awarding
contract.
 The foreign suppliers should be
subjected to the same standard
of evaluation as applicable to
domestic suppliers. The aspects
like
vstability of price,
vinventory holdings,
vability to assist in new designs,
vquality system established in the
company,
vlead time requirements,
vextend of relationship that could
be established with the company,
vtrust worthiness of the supplier
and
vimpact of foreign relation with the
domestic suppliers
have to be examined and evaluated

for selecting the supplier.

 Awarding the contract
v After identifying the qualified supplier
globally, the purchaser can obtain the
details from the supplier. In case if the
foreign source is not competitive, the
domestic supplier can be selected
alternatively.
v If foreign supplier is proved to be
competitive, then the buyer can
establish contact with the foreign
supplier and obtain details regarding
terms and conditions.
v After negotiating with the supplier, a
formal purchase order detailing the
contract can be issued to the supplier.
Once order is issued, the supplier can be
subjected to performance for continuous
improvement.